INTERNATIONAL MERGERS AND ACQUISITIONS:
DIAGNOSIS AND MANAGEMENT OF CULTURAL DIFFERENCES IN
POST-MERGER INTEGRATION
Martin C. Reimann, Freiberg University, Germany
Oliver S. Schilke, Witten Herdecke University, Germany
ABSTRACT
Mergers and acquisitions have been a key strategy for international expansion in the
corporate 1990s. However, since the beginning of the new millennium, multinational
organizations rather focus on integrating their merged or acquired companies. Many of these
international post-merger integration processes have yet not worked out as smoothly as their
initiators have expected. A study among German, US-American, and Japanese co-workers
found that differences between national cultures can explain the occurrence of problems in
international post-merger integration. This article argues that a thorough diagnosis of
differences between national cultures can improve post-merger integration success. Equally,
this research demonstrates the need to develop and implement measures for overcoming
culture-bound problems.
KEY WORDS:
international mergers and acquisitions, post-merger integration, national culture, intercultural
management, global strategy, cross-cultural behavior introduction
Introduction
The 1990s were a “merger decade”. Never before did as many organizations merge or acquire
other organizations, and above all, on a global basis. Cross-border mergers and acquisitions
have become a major strategic tool for growth of multinational companies (Cartwright and
Cooper 1993). The number of cross-border deals increased spectacularly from approximately
2.500 in 1990 to about 6.500 in 2000 as a result of globalization and increasing competition,
just to name two reasons (OECD 2001). Since 2000, however, the picture has changed
dramatically. Because of weak capital markets, a tight lending environment, and slowing
economies all over the world, post-merger organizations focus on integrating their businesses
rather than further expanding them through M&A. Enterprise integration has become a top
priority of organizations in the 2000s.
Unfortunately, those integration efforts frequently are not fruitful. Several studies point to
failure rates of 50 percent and more (Ravenscraft and Scherer 1987, Bekier, Bogardus, and
Oldham 2001, Adolph et al. 2001). Although there are literally hundreds of reasons why the
failure rates are so high, many can be traced back to cultural differences. A.T. Kearney found
that there is an explicit relationship between cultural barriers and the success of international
mergers (Augustine 1999). Other researchers state that the underestimation of differences
between national cultures is among the most frequent mistakes of international mergers and
acquisitions’ management (Cahill 1996, Vestring, King, and Rouse 2003, Weber and Camerer
2003). Consequently, the failure rates are exceptionally high in cross-border mergers where
differences between national cultures play an essential role (Cartwright 1998).
If differences between national cultures are among the main reasons for problems in
international mergers and acquisitions, what can be done to deal with those problems? Firstly,
there is a need to diagnose differences between national cultures. To do so, an empirical study
was applied in which cultural differences among German, US-American, and Japanese co-
workers were diagnosed. The purpose of this study was to find out in which ways different
cultural values and attitudes are effecting post-merger organizations in their integration phase.
Secondly, management should implement measures for overcoming culture-bound problems
during the post-merger phase. Hence, based on the survey's result, the paper introduces skills
and methods, which might promote a smoother and more efficient integration process in
future international mergers and acquisitions.
The article is structured in the following manner: After an introductory outline of the
terminology regarding national culture, we introduce relevant cultural dimensions and
problem areas of international post-merger integration. We go on to describe the methodology
and empirical model designed to test the central hypotheses (that differences between national
cultures can explain whether problems occur in international post-merger integration), and to
present the results of the study. After discussing the limitations of the study, we dwell on
implications for the management of cultural differences in post-merger integration. In the
final section, we draw the conclusions.
NATIONAL CULTURE
According to Hofstede (1997), culture is “the collective programming of the mind which
distinguishes the members of one group or category of people from another”. Thus, national
culture is not a characteristic of individuals; it rather encompasses an entire population who
was conditioned by the same education and life experience. Accordingly, national cultural
differences can be defined as the degree to which cultural characteristics in one country are
different from those in another country (Kogut and Singh 1988).
Four manifestations of national culture can be distinguished: symbols, heroes, rituals, and
values. Symbols include words, gestures, or objects that carry a particular meaning recognized
only by those who share a culture. Heroes are persons, real or imaginary, who possess
characteristics that are highly prized in a society, and, thus, serve as role models for behavior.
Rituals refer to collective activities considered socially essential within a culture. At the core
of a national culture are values which are defined as broad tendencies to prefer a certain state
of affairs over others. People are not consciously aware of the values they hold – hence, it is
difficult to discuss or observe them (DeMooji 1997).
Unraveling national culture from organizational culture is a subject which has posed a
complex challenge to researchers (Tayeb 1996). Although almost inseparable, some argue that
national culture is the fundament of organizational culture (Derr and Laurent 1989).
Following this view, organizational culture can affect everyday behavior of employees, but it
cannot change basic assumptions of the national culture which are the basis for behavioral
patterns and values. Thus, organizational culture is seen as an implication of national culture.
DIAGNOSIS OF CULTURAL DIFFERENCES IN INTERNATIONAL POST-MERGER INTEGRATION
This paper’s foundation is the assumption that differences between national cultures are a
highly relevant success factor of international post-merger integration. In order to analyze the
causal effects of national cultural deviations, differences have to be observed in combination
with problem areas of international post-merger integration. Therefore, it was hypothesized:
Differences between national cultures can explain whether problems occur in international
post-merger integration.
If the above hypothesis is proved, an analysis of differences between national cultures should
help to better understand and solve problems of international post-merger integration. Such an
analysis can be conducted on the basis of distinctive cultural dimensions which can be used to
measure cultural differences. Hence, the most important cultural dimensions developed by
Hofstede and Bond, Trompenaars and Hampden-Turner as well as Hall will be shortly
introduced.
Cultural dimensions
The number of relevant cultural dimensions is almost infinite due to the high complexity of
national cultures (Triandis 1982). Nevertheless, several scholars attempted to create selfcontained systems with dimensions that describe the most important and differentiating
characters of national cultures. In his fundamental research approach, Hofstede concentrated
on four basic dimensions of cultural values. These dimensions were:
 the degree of power distance (indicating the extent to which a society accepts the fact that
power in institutions and organizations is distributed unequally),
 the degree of uncertainty avoidance (indicating the extent to which a society tries to avoid
uncertain situations by, for example, establishing more formal rules and believing in,
and/or striving for expertise),
 the degree of individualism (indicating the extent to which relationships are based on
loose social frameworks rather than on collectivism, where people are tightly integrated in
primary groups, such as families and organizations),
 the degree of masculinity (indicating the extent to which dominant values or roles in
society are viewed “masculine”, for example achievement, assertiveness, and
performance, when measured against its opposite pole, femininity, defined as quality of
life, caring for other people as well as social and gender equality) (Hofstede 1980, 1997,
2001).
Based on their research in Asia, Hofstede and Bond (1988) found a new dimension, which
was added as a fifth dimension and labeled:
 the degree of long-term orientation (indicating the extent to which a society exhibits a
pragmatic future-oriented perspective rather than a conventional, historic short-time point
of view).
Similar to Hofstede, the goal of Trompenaars’ and Hampden-Turner’s approach was to
pinpoint the possible existence of differences between national cultures. They built on an
earlier study by Parsons and Shils (1951) and narrowed human behavior down to five
dimensions:
 the degree of universalism (indicating how a culture evaluates the behavior of members of
other cultures),
 the degree of individualism (which was already explained above),
 the degree of neutrality (indicating the intensity with which people express feelings when
interacting with others),
 the degree of specificity (indicating the extent to which people engage others in their
private spheres),
 the degree of achievement orientation (indicating how cultures award status)
(Trompenaars and Hampden-Turner 1998, Hampden-Turner and Trompenaars 2000).
The third revisited scholar in the field of national culture differences is the anthropologist
Hall. He takes four cultural dimensions into account:
 the degree of context (indicating that members of low-context cultures seriously depend
on the external environment, the situation, and non-verbal behavior when creating and
interpreting communication versus members of high-context cultures, which learn from
birth to interpret the hidden clues given in these contexts when they communicate),
 the degree of timing (indicating the difference between monochromic cultures, which
divide time linearly, and polychromic cultures, which accomplish many things at once),
 the degree of space allocation (indicating that different national cultures have a different
relationship to space),
 the degree of speed of message (indicating different speeds at which information is coded
and decoded in everyday communication) (Hall 1989a, 1989b, 1990a, and 1990b).
Problem Areas of International Post-Merger Integration
The main goal of this paper is to link cultural differences to specific problem areas of
international post-merger integration. The composition of possible problem areas of
international post-merger integration was approached by a double-tracked strategy. Firstly,
the available literature in the field of M&A management and post-merger integration
management was studied. Secondly, exhaustive observations as well as oral interviews were
used to assess the relevance of the problem areas identified in the literature.
When analyzing the influence of cultures on mergers and acquisitions, Reinecke (1988) was
one of the first to categorize specific areas where culture altered organizations. He lists
strategy, leadership, communication, personnel management, and organizational structures as
possible problem areas. Lucks and Meckl (2002) mention team orientation and payment
issues as further problem areas of international post-merger integration. Similarly, Weber and
Camerer (2003) point to leadership and communication problems as reasons for merger
failure caused by cultural conflict. Finally, Calori, Lubatkin, and Very (1994) as well as
Pitkethly, Faulkner, and Child (2000) bespeak the importance of problems relating to the
acceptance of formalization and centralization after international mergers or acquisitions.
Through the interviews, especially the following categories of problem areas were confirmed
to be of great practical importance: content of communication, leadership style, centralization,
formalization and payment. Those problem areas were applied in the research study.
RESEARCH STUDY
A lot of previous studies have touched on facets of merger failure. However none of these
studies have conclusively determined the causal effect of cultural differences (Weber and
Camerer 2003). While Morosini, Shane, and Singh (1998) found that national cultural
differences generally have an impact on cross-border acquisition performance, they did not
link specific cultural characteristics to particular problem areas of post-merger integration.
This study aims to fill this gap. We intended to analyze the specific consequences of the clash
of different cultures in deep detail.
The empirical study concentrates on the case where a large German company merged with an
US-American and a Japanese company. This case is specifically revealing because in past
studies dealing with national cultures, those three nations showed huge differences concerning
various cultural dimensions (Hofstede 2001). Overall, 105 interviewees out of 212 possible
participants contributed to the study, which yields to a return rate of 49.5 percent.
Cultural Differences
Firstly, cultural differences between the German, US-American, and Japanese interviewees
were analyzed. Hence, the grouped medians of the three national cultures were compared
dimension by dimension. This approach had three specific advantages compared to the
approach of using the arithmetic mean: first, the grouped median is more robust against
runaway values; second, through its robustness, the fluctuant number of questionnaires from
different national cultures – more German returns than US-American and Japanese – does not
cause trouble; and third, the grouped median guarantees comparability among the questions
(Forstmann 1994).
For each cultural dimension, the interviewees were asked to rank a respective question from 1
(“strongly agree”/ “most important”) to 7 (“strongly disagree” / “most unimportant”). Control
questions assured the validity of the answers. The grouped medians for each national culture
were calculated and plotted on the axes of the culture web as illustrated in Figure 1. The
closer the grouped median was to 1, the more a national culture tended towards the respective
cultural dimension.
Insert Figure 1 here
Interpreting the culture web clockwise, the first cultural dimension was the degree of power
distance. The interviewees were asked to rank their acceptance of an autocratic leadership
style as an indicator for the degree of power distance. The illustration demonstrates how the
preferred leadership styles of the Japanese and the two Western cultures were opposite to each
other. Most Germans and US-Americans preferred a rather cooperative leadership style,
where subordinates function as their boss’ consultants (low power distance). Japanese
employees, however, tended to favor the “aristocratic” boss, who makes decisions by himself
and communicates them clearly and firmly, which refers to high power distance (Hofstede
2001).
The second observed cultural dimension was the degree of uncertainty avoidance. Here, the
Japanese ranked higher than both Germans and US-Americans. This complies with
Hofstede’s findings, which also rank the Asians before the Westerners in terms of uncertainty
avoidance (Hofstede 2001).
Regarding the degree of individualism, a major difference was seen between the two Western
cultures and the Japanese culture. While Germans and US-Americans enjoyed free time with
family and freedom in organizing their own work, Japanese preceded the company before the
family and preferred working in groups.
Referring to the degree of masculinity, all three national cultures were close together on the
masculinity axes of the culture web. Germans, US-Americans and Japanede tended to prefer
working in a cooperative climate – a rather feminine value.
On the axes referring to the degree of long-term orientation, Japanese, Germans, and USAmericans were close together. Although the degree of long-term orientation was especially
created for Asians by Hofstede and Bond (1988), all three national cultures can be considered
long-term oriented.
Regarding the degree of universalism, the Japanese and the two Western cultures were on
opposite sides again. While the universalistic cultures of Germans and US-Americans saw
contracts as the basis of everyday business, the particularistic Japanese culture was convinced
that personal relationships and networking as well as trust and confidence would suffice.
Concerning the degree of neutrality, only small differences between the three national cultures
were found. Only the German interviewees showed a tendency to being rather emotional and
less neutral than their fellow interviewees from the United States and Japan.
The assessment of the degree of specificity showed that Germans and US-Americans – in
comparison to Japanese – are rather specific cultures. They tended to keep the company out of
their private life.
The next observed cultural value referred to the degree of achievement orientation. Germans
and US-Americans tended not to care as much about expressing own thoughts at work (low
degree of achievement orientation). This astonishing finding might have to do with the need
to comply with superiors’ opinions. On the other hand, Japanese showed their true ascription
orientation, which refers to low achievement orientation (Takeuchi 1987).
Regarding the degree of context, the assessment illustrates that Japanese were high context
oriented while US-Americans – and even more so Germans – were low context oriented. In
business, this orientation can be highly relevant. According to a German interviewee,
communication problems occurred during negotiations with Japanese. The Japanese business
partners wanted to get to know the Germans well before doing any business while the
Germans eagerly waited to start the negotiations. Another German interviewee, who was
commenting the context orientation of Japanese, answered that if Japanese would call a task
“difficult to accomplish”, this really would mean that it could not be done at all.
Concerning the degree of timing, the Germans and US-Americans tended towards a
polychromic culture and mostly agreed upon working at two projects simultaneously instead
of finishing one project after another. With regard to Germans, this result might relate to their
notion of always thinking in terms of efficiency (Lewis 1999). The Japanese tended to be
monochromic, answering mostly in favor of the monochromic axes, which is similar to the
results of Hall and Hall (1990).
As to the degree of spacing, no large differences between Germans, US-Americans, and
Japanese were found. All three national cultures declined to be overly exaggerated when
meeting a business partner; a formal greeting with handshaking was seen as adequate.
Finally, the degree of speed of message in each national culture was measured. While
Germans and Japanese highly valued formal etiquette by using last names and academic titles,
the US-Americans tended to decline this form of contact in business situations. They rather
preferred using first names quickly and did not highly value academic titles (Bloom 1988).
In conclusion, considerable differences among the three national cultures in business
situations were identified. Concerning the dispersion of the answers, a relatively low
dispersion within the groups was found. This refers to homogeneity of the three national
cultures. Most of the findings of this study strongly comply with the research results of
Hofstede, Trompenaars and Hampden-Turner, and Hall. Thus, nomological validity of this
survey can be assumed.
Dependencies among Differences between National Cultures and Perceived Problem Areas
In a next step, dependencies among cultural differences and perceived problem areas of
international post-merger integration were evaluated. In this regard, the central hypothesis
stated that differences between national cultures can explain whether problems occur in
international post-merger integration. If correlations were found between cultural differences
and perceived problem areas, then the hypothesis would be confirmed. Consequently, each
relevant problem area was correlated with the results from the culture questions as illustrated
in Figure 2 (US-Americans versus Japanese were not compared because there was no direct
confrontation of US-Americans and Japanese at the analyzed companies). To do so, a
bivariate correlation analysis was conducted using SPSS 11, and the Pearson correlation
values were produced.
Insert Figure 2 here
With regard to the relationship of Germans and US-Americans, three correlations among
differences between national cultures and problem areas of international post-merger
integration were found. First, there was a weak positive correlation between high context
orientation and the problem area content of communication. This means that low-on-context
interviewees – the Germans – faced difficulties with the type of content they transport to
people, who were higher on context – like the Japanese. Second, there was a weak positive
correlation found between high individualism and the problem area payment, which points to
individualistic interviewees perceiving a problem in foreign payment systems. Third, there
was a weak positive correlation found between high individualism and the problem area
formalization. In this regard, those interviewees, who enjoyed the freedom of organizing their
own workday and work routines, perceived an upcoming formalization as problem area. This
might refer to US-Americans perceiving stronger formalization when working with Germans.
Regarding the relationship between Germans and Japanese, the dependencies were stronger
than between Germans and US-Americans. Eight correlations were most outstanding. First,
there was a strong positive correlation between high power distance and the problem area
leadership style. The reason might be that Japanese interviewees – who were higher on power
distance than Germans – were uncomfortable with the leadership style of their German
superiors. As discussed earlier, Japanese tended to prefer a rather autocratic manager while
Germans preferred a rather cooperative manager. Thus, German superiors applying a
cooperative leadership style were not preferred by their Japanese subordinates. Second, a
strong negative correlation was found between high collectivism and, again, the problem area
leadership style. This might relate to rather collectivistic Japanese – who prefer working in
groups – and a rather individualistic German leadership style, which stresses individual needs
before group needs. Third, strong correlations were found between the degree of context and
the problem area content of communication. Here, Japanese interviewees – high on context –
collided with their German colleagues, who were low on context. As debated earlier,
members of low-context cultures seriously depend on the external environment and the
situation when creating and interpreting communication. Conversely, members of highcontext cultures learn from birth to interpret the hidden clues when they communicate. Thus,
an indirect style of communication is valued, as is an ability to understand it. Fourth, a strong
positive correlation was found between achievement orientation and the problem area
qualification. In this regard, interviewees with a high ascription orientation perceived
qualification as a problem area of integration. The reason here might be the breach of the
Japanese seniority principle, which promotes the older before the younger. Since the seniority
principle stands in clear contrast to German principles – which generally promote by
qualification and achievement – Japanese interviewees might have been the ones perceiving a
problem area. Fifth and sixth, strong correlations were found between the degree of power
distance as well as the degree of context and the problem area centralization. This might refer
to Japanese – very power distant and high on context – versus Germans, who are less power
distant and low on context. Strong correlations were also found between the degree of power
distance as well as the degree of context and the problem area organizational structure. A
possible explanation might be that a change in the organizational structure was perceived as a
problem area by Japanese employees.
In conclusion, relationships among differences between national cultures and perceived
problem areas were found between Germans and US-Americans as well as Germans and
Japanese. The central results of the study can be summarized as follows:
 With the help of the questionnaire and its utilized cultural dimensions, significant cultural
differences between Germans, US-Americans, and Japanese could be assessed.
 Additionally, differences between national cultures did explain whether problems occur in
international post-merger integration. In this regard, the survey’s central hypothesis was
supported. Concerning Germans versus US-Americans, only weak correlations between
cultural differences and perceived problem areas were found, which is another striking
argument for a successful transatlantic post-merger integration process. However, strong
correlations were found with regard to Germans and Japanese, which points to an
incomplete post-merger integration.
Thus, those problem areas of international post-merger integration, which could be explained
through differences between national cultures, will be called “culture-bound problem areas”
in the further analysis. Culture-bound problem appear on two different levels – the individual
level and the organizational level – as illustrated in Figure 3. The individual level can be
subdivided into the “interpersonal level” (including content of communication as well as
qualification) and the “leadership level” (including leadership styles). The organizational level
includes organizational structure and payments – those tasks, which generally occur on the
administrative level of an organization. This level relates to the organizational body, which
surrounds the employees.
Insert Figure 3 here
LIMITATIONS
The data limitations of this survey shall be distinguished in culture-free and culture-bound
limits. Culture-free limitations are of a rather general nature and, thus, apply for most surveys
of social empirical research. Culture-bound limitations can be explained through the assessed
data of this survey.
With regard to culture-free limitations, two limits were found. The first limit was the
allocation of the interviewees regarding their citizenship. More Germans than any other
nationality were represented in the survey. The second limit was the allocation of the
interviewees regarding their sex. Women were widely underrepresented in the survey,
especially in the case of the Japanese interviewees, who were all male. Both allocations may
have influenced the final outcome of the survey.
Likewise two limits were found with regard to culture-bound limitations. First, the most
obvious culture-bound limitation relates to the “culture ballast”, which every researcher in the
field of cross-cultural research brings into the research. For the purpose of this paper, culture
ballast indicates the transfer of own, subjective values into the design of a questionnaire.
Eventually, justifiable predications about cause and impact of differences between national
cultures can only be made in the own surroundings of the researcher. In other cultural
surroundings, those predications might be useless or would not be understood (Kutschker
2001). Here, the predictor was German. Thus, German values and attitudes might have
influenced the evaluation of differences between national cultures.
Another culture-bound limitation to be assessed was the problem of “imposed ethics”. With
imposed ethics, the cross-cultural researcher assumes that all value questions have the same
meaning and weight in the different cultures analyzed (Smith, Dugan, and Trompenaars
1996). This method, however, is highly questionable since values often have different valence
and meaning in difference cultures. The most clear-cut example is Hofstede’s uncertainty
avoidance dimensions and its underlying values. In Asia, the results of the uncertainty
avoidance questions never correlated with the other dimensions, which led to the creation of
the long-term versus short-term dimension especially for Asians (Hofstede and Bond 1988,
Hofstede 2001).
MANAGEMENT OF CULTURAL DIFFERENCES IN POST-MERGER-INTEGRATION
The identified culture-bound problem areas of international post-merger integration – content
of communication, qualification, leadership style, organizational structures, and payment–
will be the basis for the following discussion about managing national cultures in international
post-merger integration. For each of these problem areas, specific approaches to manage the
occurring difficulties will be presented.
Analogous to several other change management efforts, there are generally two approaches to
manage national cultures, as illustrated in Figure 4: starting “bottom-up” at the individual
level or, respectively, “top-down” at the organizational level (Porter, Lawler, and Hackman
1975).
Insert Figure 4 here
The bottom-up approach includes those activities employees initiate on their own accord. The
opposite is true for the top-down approach where adaptations to national cultures are
embraced on the organizational level and activities are initiated from the top of an
organization.
Bottom-up Adaptation
Bottom-up adaptations take place on the individual level and can be subdivided into the
interpersonal level and the leadership level. Three types of individual skills and abilities with
regard to working with people from other cultural backgrounds after a merger will be
introduced: The interpersonal level includes cross-cultural communication and general crosscultural qualifications. With regard to the leadership level, cross-cultural leadership will be
encapsulated.
Cross-cultural Communication
In the study, a connection between the context orientation of a culture and the problem area
content of communication could be identified. Mainly three reasons can be made responsible
for misunderstanding in cross-cultural communication: misperception, misinterpretation, and
misevaluation. Perception is a selective process, where individuals screen out most of what
they see, hear, taste, and feel. It is learned through experience, which teaches individuals to
perceive their surroundings in certain ways. Thus, it is culturally determined (Adler 1997).
One example for misperception is stereotyping, which involves a form of categorization that
guides individual behavior towards ethnic and national groups. Misinterpretation, on the
contrary, arises from subconscious cultural blinders such as the astonishment of Germans
about the US-American open-door policy in business. It is also based on a certain lack of
cultural self-awareness and projected similarities, which refers to the assumption that other
people are more similar to one self than they actually are. Misevaluation is based on
ethnocentrism and involves judging whether someone or something is good or bad by using
one’s own national culture as standard of measurement.
There are proposals for solutions to the above examples of misunderstanding. When working
in other national cultures, individuals should generally emphasize description rather than
interpretation or evaluation and, therefore, minimize self-fulfilling stereotypes and premature
judgment. Effective communication across cultures presupposes the interplay of alternative
realities. Thus, it discards the actual and potential domination of one reality over another
(Adler 1997).
General Cross-cultural Qualifications
The knowledge about the existence of differences in national cultures is not enough for
globally acting managers. Thus, we must distinguish between two levels of general crosscultural qualification. First, there are professional competences, including foreign language
abilities and knowledge about the economical, technical, and political distinctiveness of the
visited foreign country. Second, there are managers’ personal characteristics, including
cognitive maneuverability, cross-cultural adaptability, impartiality, tolerance and respect,
maturity, empathy, as well as cultural self-awareness (Berger 1998, Hampden-Turner and
Trompenaars 2000, Mendenhall et al. 2002).
Although general cross-cultural qualifications are abilities and skills of individuals, the
organization can apply measures – like cross-cultural training and team building, which will
be introduced in the top-down adaptation segment of this paper – to improve those individual
qualifications.
Cross-cultural Leadership
In the study, a linkage was found between the cultural dimensions power distance and
individualism and the problem area leadership style. In the literature, a vast amount of
information can be found regarding leadership and leadership styles. Most of those leadership
theories have been developed in the United States. Rather than being applicable worldwide,
many traditional models effectively guide thinking and action only within the US-American
context for which they were developed. Thus, participative leadership approaches are not
suitable for all cultures as shown by this survey’s findings. Employees in high power distance
countries such as Japan expect managers to act as strong leaders. They would become
uncomfortable with leaders delegating discretionary decisions. Some national cultures want
their managers to act as decisive, direct experts. Others want managers to act as participative
problem solvers. One of the most prominent and most popular US-American leadership styles
is probably “Management by Objectives” (MbO) as stated by Drucker (1993). It reflects USAmerican values by assuming that subordinates are sufficiently independent to negotiate
meaningfully with their superiors (medium power distance), both of them are willing to take
risks (low uncertainty avoidance), and performance is seen as an important criterion by both
(high masculinity) (Hofstede 2001). Conversely, in other countries, MbO works differently.
For example, Germany’s higher ranking on uncertainty avoidance proposes a lesser German
willingness to accept risks when compared with US-Americans. Thus, in Germany MbO was
transformed into an elaborate leadership style called “management by joint goal setting”. This
leadership principle evolved out of political and societal pressure towards increasing the
welfare of all people in organization and their right of participation (Giegold 1978). Another
popular US-American leadership style is “management by walking around” (MbWA), which
is characterized by superiors regularly walking through office buildings and shop floors to
engage into small talk with their subordinates. MbWA bases on the idea of a bilateral
dialogue with the superior learning about employee problems as well as subordinates learning
about management’s goals (Peters 1995). While being popular in Germany and the United
States, in Japan, however, applying MbWA could be a mistake.
As shown in the study, the more different domestic leadership styles are from others, the
larger the problems can become in international post-merger integration. Thus, based on the
cultural context of their operations, global managers must constantly evaluate and decide
which leadership style to employ. Their decision must not only depend on the particular
industry, organization, and individuals involved but also on the specific national culture.
In moving from domestic to global management, leaders must become flexible enough to
adapt to each particular situation and country, and they must develop a wider range of
thinking patterns and behaviors.
Top-down Adaptation
Second, the top-down approach of adaptation to different national cultures will be
illuminated. According to the survey’s results, organizational structures and payment
supplemented with incentives were found as culture-bound problem areas of international
post-merger integration. Here, the organizational level needs to be supplemented with crosscultural training and cross-cultural team building to improve the individual general crosscultural qualifications.
Organizational Structures
Organizational structures can be defined as a set of established regularities in activities such
as task allocation, coordination, and supervision (Tayeb 1996). They can be distinguished in
terms of their dimensions, including: centralization (the degree to which decisions are made
by a small group of top managers), specialization (the degree to which functions, such as
marketing, and roles, such as machine minding, are carried out by specific departments or
persons), formalization (the degree to which written rules and regulations are used to regulate
the organization’s activities and the employees’ job, such as job descriptions), and
standardization (the degree to which standard procedures are used for certain re-occurring
activities, such as quarterly purchases) as described by Pugh et al. (1968).
In order to find the ideal organizational structure for a specific national culture during the
post-merger integration phase, especially the power distance and uncertainty avoidance
dimensions can be employed, as emanated from this paper’s study. In terms of organizational
structure, Germans relate to a well-oiled machine (formalized but not centralized) and
Japanese relate to a pyramid of people (both centralized and formalized). Conversely, USAmericans rather tend to the center of the map, which explains the success of many USAmerican operations in very different national cultures. However, according to the common
US-American conception of organization, hierarchy in terms of centralization is not a goal by
itself as it might be in Japan. Also, for US-Americans, rules in terms of formalization are not
a goal by themselves as they are in Germany (Hofstede 2001, Laurent 1986).
Payment and Incentives
Payment and incentives were also found to be a culture-bound problem area and to be
correlated with the degree of individualism. In the survey, several German interviewees
complained about higher fixed payments of their US-American colleagues. Beyond base
salaries are incentive systems. They are used to motivate employees extrinsically – in terms of
bonuses, stock options, or a company car – as well as intrinsically in terms of work content,
the ability to decision making, or continuing education, to name just a few (DeVoe and
Iyengar 2004).
Payment and incentive systems, however, differ between national cultures. According to a
study that correlated Hofstede’s dimensions and several compensation packages, uncertainty
avoidance was positively related to pay based on seniority and skill as well as negatively
related to pay based on performance. Individualism was positively related to pay for
individual performance, stock options, and ownership for managers. And finally, power
distance was negatively related to workplace child care for managers (Schuler 1998). Thus,
payment and incentive systems should be adapted to the specific needs of a national culture.
On the one hand, this might result in stronger effects on motivation. On the other hand, it can
decrease cross-border comparability and result in discontent among employees.
Cross-cultural Training
Cross-cultural training is a key method to improve the interaction of employees from different
national cultures. As stated before, international post-merger integration specifically calls for
a high degree of cross-cultural understanding. Thus, cross-cultural training is a powerful
organizational tool to teach employees the cross-cultural abilities and skills discussed before.
Employees confronted with other national cultures should not only be taught in the foreign
language but also how to achieve cross-cultural competence, which should include: crosscultural communication, code of conduct (including, for example, different forms of greeting,
gifts and bribery, drinking and dining as well as rules of punctuality), social relationships
(including, for example, family and hierarchical relationships, castes and classes as well as
subordination), motives and motivation (including, for example, individual and socially
accepted motives and forms of motivation), and value concepts and ideologies (including
evaluation of different values, behaviors, and world views). The developed tools of crosscultural training are so manifold that only a brief overview will be given here (Hoppes and
Ventura 1979, Brislin and Yoshida 1994, Fowler and Mumford 1995, Landis and Bhagat
1996, Cushner and Brislin 1997).
Cross-cultural training can be distinguished by its content and method. While cross-cultural
knowledge intermediation is a rather monologue form of training, participants of crosscultural behavior training are expected to interact in dialogues with their trainers. Those
dialogues come mostly in form of experimental learning situations such as simulations and
role play or even travel experiences prior to the foreign assignment. Interestingly, often the
foreign assignment itself is seen as the best tool to learn cross-cultural competence. This has
to do with the difficult evaluation of the above mentioned training methods. Direct immersion
into the host culture without prior training, however, is not a suitable approach for better
international post-merger integration. Due to the almost inevitable appearance of a culture
shock, as well as the general uncertainties after a merger, a newly merged or acquired
organization is the wrong place for cross-cultural training. A more successful way would be to
start a solid preparation with initial cross-cultural training in the home culture, followed by
continued training while already working in the host culture.
Cross-cultural Team Building
Cross-cultural team building after mergers and acquisitions is another ideal organizational
tool to adapt to culture-bound problem areas. It is a specialized approach that helps culturally
diverse work groups to achieve high productivity and cooperation. Those teams possess the
breadth of resources, insights, perspectives, and experiences that facilitate the creation of new
and better ideas (Schnapper 1996, Adler 1997). Cross-cultural teams can be managed over
three stages: the entry and formation stage (including trust building and developing cohesion
among the diverse national cultures), the work stage (including the problem description and
idea creation utilizing culturally diverse experiences), and the action stage (including
consensus building, decision making, and implementation) as described by Adler (2002).
Unfortunately, cross-cultural teams rarely achieve their full potential. Process losses because
of mistrust, misunderstanding, miscommunication, stress, and a lack of cohesion often negate
the potential benefits of cultural diversity in teams. Researchers have found that team
members from more collectivist cultures, such as Japan, work more cooperatively with each
other than their counterparts from rather individualist cultures, such as the United States (Cox,
Lobel, and McLeop 1991). Only when team diversity is well managed can cross-cultural
teams achieve their full potential. To function effectively, cross-cultural teams must,
therefore, use their diversity to generate multiple perspectives, problem definitions, ideas,
action alternatives, and solutions; learn to achieve consensus such as agreeing on specific
decisions and directions, despite the diversity; and balance the simultaneous needs for
creativity with those for cohesion (Adler 1997).
CONCLUSION
This paper set out with two goals. The first goal has been to verify the central hypothesis,
which was that differences between national cultures can explain whether problems occur in
international post-merger integration. Thus, theoretical methods for measuring differences in
national cultures were reviewed and applied in a survey which confirmed the central
hypothesis. The second goal has been to identify practical solutions based on the survey’s
results, so that culture-bound problem areas of international post-merger integration could be
managed better by practitioners. Future work in this field of study might analyze post-merger
integration of other nations than Germany, the United States, and Japan, and might build on
what has been learned from this study. Analyzing other national cultures with their different
cultural dimensions might lead to completely new insights regarding relevant problem areas
of post-merger integration. By combining the results of such studies, an overview of national
cultures and respective problem areas could be achieved. Alternatively, future research might
also consider the impact of organizational culture. This could serve to separate the effects of
organizational culture differences and national culture differences on merger success. Thus, a
better understanding of the general interrelationship between organizational and national
culture could be developed. Future research could also add value by applying different
research methods. Cross-industry studies, including a large representative sample, might lead
to more general applicable results. Additionally, longitudinal studies analyzing the effects of
the management of cultural differences in post-merger integration would be very helpful. To
sum up, this study has explored a previously almost unexamined topic – the causal effects of
national cultural differences in post-merger integration. Our findings underline that national
cultures are of great importance for merger success.
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FIGURES
Degree of
Individualism
7 Degree of
Masculinity
6
Degree of
Long Term
Orientation
5
Degree of
Uncertainty
Avoidance
4
Degree of
Universalism
3
2
1
Degree of
Neutrality
Degree of
Power Distance
Degree of
Speed of Message
Degree of
Specifity
Degree of
Spacing
German
US-American
Japanese
Degree of
Timing
Degree of
Achievement
Orientation
Degree of
Context
Figure 1: Cultural Dimensions of German, US-American, and Japanese Employees
Differences between
National Cultures
Germans
vs.
US-Americans
Germans
vs.
Japanese
Perceived
Problem Area
Hall’s
Context
Dimension
0,251
(**)
Content of
Communication
Hofstede’s
Individualism
vs. Collectivism Dimension
0,290
(**)
Payment
Hofstede’s
Individualism
vs. Collectivism Dimension
0,260
(**)
Formalization
Hofstede’s
Power Distance
Dimension
0,400
(***)
Leadership Style
Hofstede’s
Individualism
vs. Collectivism Dimension
-0,371
(***)
Leadership Style
Hall’s
Context
Dimension
0,535
(***)
Content of
Communication
Trompenaars’
Achievement vs.
Ascription Dimension
0,459
(***)
Qualification
Hofstede’s
Power Distance
Dimension
-0,430
(***)
Centralization
Hall’s
Context
Dimension
-0,451
(***)
Centralization
Hofstede’s
Power Distance
Dimension
-0,374
(***)
Organizational
Structure
Hall’s
Context
Dimension
0,548
(***)
Organizational
Structure
Verification of Central Hypothesis:
Differences in national cultures do explain whether problems
occur in international post-merger integration!
(**) Correlation is significant at the 0,05 level. (***) Correlation is significant at the 0,01 level.
Figure 2: Correlation of Differences between National Cultures and Problem Areas
16
Organizational
Level
(Organizational
Structures, Payment)
Leadership Level
(Leadership Styles)
Individual
Level
Interpersonal Level
(Content of Communication,
Qualification)
Figure 3: Levels of Culture-bound Problem Areas in International Post-Merger Integration
Top-Down:
Adaptations on the Organizational Level
Organizational
Level
Leadership Level
Interpersonal
Level
Organizational Structures
Payment and Incentives
Cross-cultural Training
Cross-cultural Team Building
Cross-cultural Leadership
Cross-cultural Communication
General Cross-cultural Qualifications
Bottom-Up:
Adaptations on the Individual Level
Figure 4: Managing National Cultures in International Post-Merger Integration: Bottom-Up
and Top-Down
Contact Person:
Martin C. Reimann
Doctoral Candidate and Lecturer of Marketing
Freiberg University
Chair for Marketing and International Trade
Lessingstrasse 45
Freiberg, Germany 09596
Phone: +49 3731 392004
Fax: +49 3731 394006
17
E-Mail: martin.reimann@bwl.tu-freiberg.de
Oliver S. Schilke
Doctoral Candidate and Research Associate
Witten Herdecke University
Deutsche Bank Chair for Management
Alfred-Herrhausen-Strasse 50
Witten, Germany 58455
Phone: +49 175 1618120
E-Mail: oliverschilke@web.de
18